Cost effective environment

Latvia offers a cost-competitive business environment combining moderate labour costs, competitive real estate options and one of the world’s most competitive tax systems. In 2025, average hourly labour costs in Latvia were estimated at €16.3, around half of the EU average of €34.9 and below both Lithuania and Estonia. Latvia also ranks 2nd globally in the 2025 International Tax Competitiveness Index, supported by its corporate income tax model where reinvested profits are not taxed.

Tax rates

From 1 January 2018, Latvia has a new corporate income tax (CIT) under which retained earnings are exempt from CIT, and only distributions are taxed. The CIT rate on gross profit distribution is 20%. Latvia applies a progressive personal income tax (PIT) system. Since 2025, annual income up to EUR 105,300 is subject to PIT at the rate of 25.5%, while income exceeding EUR 105,300 is taxed at 33%. In addition, a supplementary 3% tax applies to annual income exceeding EUR 200,000. Income from capital and capital gains is generally taxed at 25.5%.

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Latvian Tax System Overview 2026

Special economic zones

Latvia has 5 free economic zones (Riga, Ventspils, Liepaja, Rezekne and Latgale) that benefit entrepreneurs. The main benefits for companies operating in Free Ports and SEZ territories are tax rebates on the real estate tax, corporate income tax (applies in case of withdrawal of dividends, otherwise - CIT in Latvia is 0%).

SEZ offer tax Incentives in the form of:

• 80% rebate on the applicable Corporate Income Tax, which can make the tax rate as low as 4%
• 80% rebate on the applicable Property Tax which can make the tax rate as low as 0.3%
   

Labour expenses

According to Eurostat, average hourly labour costs in Latvia reached EUR 16.3 in 2025, remaining well below the EU average of EUR 34.9 and the euro area average of EUR 38.2. While labour costs have increased in line with wage growth and labour-market development, Latvia continues to offer a favourable balance between workforce quality and cost efficiency. In 2025, Latvia’s hourly labour costs were also lower than in neighbouring Lithuania and Estonia, supporting its position as a competitive location for labour-intensive and internationally oriented business operations. Sector- and occupation-specific salary benchmarks can be provided by LIAA’s Investment Promotion Division upon request.

Real estate

Given its relatively sparse population density, Latvia offers a range of location options for both industrial and office activities. Across major cities, numerous unoccupied factory structures can be found, complemented by historic urban cores that are undergoing a transition from residential to commercial, entertainment, and retail purposes. Beyond standalone properties, various business-oriented parks have been established or are currently in development, catering to diverse tenant requirements.

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Contacts

Riga office

Address: Perses Street 2, Riga, Latvia, LV-1442
Web: www.investinlatvia.org
For more information: invest@liaa.gov.lv
For tailored advice contact our team of experts